UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Securities Exchange Act of 1934
Release No. 40376 / August 27, 1998
Administrative Proceeding File No. 3-9688
ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS INSTITUTED
AGAINST WHEAT, FIRST SECURITIES INC. f/k/a FIRST UNION
CAPITAL MARKETS CORPORATION
On August 27, 1998, the Commission instituted public
administrative and cease-and-desist proceedings against
Wheat, First Securities Inc. f/k/a First Union Capital
Markets Corporation ("First Union"), a Charlotte, N.C.-based
broker-dealer. The Order Instituting Administrative and
Cease-And-Desist Proceedings Pursuant to Sections 15(b),
15B(c), 19(h) and 21C of the Securities Exchange Act of 1934
("Exchange Act") alleges that First Union committed or
caused violations of Section 15B(c)(1) of the Exchange Act,
and Rule G-17 of the Municipal Securities Rulemaking Board
in connection with the offer, sale and/or purchase of
municipal bonds.
Specifically, the Order alleges that in June 1993, First
Union, by and through the assistant vice-president and
manager of First Union's public finance operations in Miami,
Florida ("public finance manager") entered into a two-year
contract with Broward County to act as financial advisor to
Broward County in connection with the offer and sale of
certain municipal refunding bonds ("financial advisor
contract"). The Order alleges that under the terms of the
financial advisor contract, First Union warranted "that it
had not employed or retained any company or person, other
than a bona fide employee working solely for [First Union],
to solicit or secure this Agreement, and that they have not
paid or agreed to pay any person, company, corporation,
individual or firm, other than a bona fide employee working
solely for [First Union], any fee, commission, percentage,
gift, or other consideration contingent upon or resulting
from the award or making of this Agreement." The Order also
alleges that pursuant to Florida statute, First Union was
required to disclose to Broward county "[a]ny fee, bonus, or
gratuity paid . . . in connection with the bond issue, to
any person not regularly employed or engaged . . ." by First
Union within 90 days after the delivery of the bonds.
According to the Order, First Union, through its public
finance manager, retained an outside consultant and lobbyist
("the lobbyist") to, among other things, secure the
financial advisor contract. First Union is also alleged to
have agreed to pay the lobbyist a contingency fee based upon
the business the lobbyist generated for First Union in
connection with the financial advisor contract and remitted
a percentage of its earnings under the contract to the
lobbyist between December 1993 and October 1994. The Order
states the First Union's warranty to Broward County in the
financial advisor contract was therefore false and that
First Union failed to disclose to the county its agreement
with the lobbyist and the payments made to him. The Order
further alleges that as a result of these
misrepresentations and omissions, First Union was able to
act as financial advisor to Broward County on three bond
refundings for which it was compensated approximately
$175,653.
A hearing will be scheduled to determine whether the
allegations against First Union are true, and if so, what
sanctions, if any, are appropriate in the public interest
against it.